Notice: The information contained on this page only pertains to cases filed on or after October 17, 2005. The information contains only general information and is not intended to be legally precise or comprehensive. If you have specific question about bankruptcy then you should contact me or another attorney. The information contained on this page does not create an attorney-client relationship.

Debtor’s Frequently Asked Questions

What is Bankruptcy?
Bankruptcy is a legal process that provides relief to many individuals who can no longer pay their debt. The right to file for bankruptcy is provided by federal law, and bankruptcy proceedings are handled in federal bankruptcy court. Filing for bankruptcy generally stops most creditors from seeking to collect debts. The goal of most debtors is to obtain a discharge order from the bankruptcy judge. The discharge order has the effect of releasing the debtor from many forms of debt that were incurred prior to the bankruptcy filing.

When should bankruptcy be considered?
The amount of unpaid bills is such that repayment is unlikely or impossible in the foreseeable future
A secured creditor is threatening foreclosure or repossession.
An unsecured creditor has commenced or threatened a lawsuit.
Creditors and/or collection agencies are making frequent calls to collect on unpaid bills.
The debtor’s credit report is irretrievably damaged.

    What are the different types of bankruptcy?

    Chapter 7. A debtor’s non-exempt assets are liquidated and many unsecured debts are discharged. Chapter 7 is sometimes referred to as straight bankruptcy.

    Chapter 13. A debtor retains his or her assets but proposes a payment plan through which creditors are paid part or all of what is owed over a period of 36-60 months. Chapter 13 is sometimes referred to as a wage-earner plan or debt-adjustment plan. A chapter 13 debtor must have a regular source of income, unsecured debts of less than $336,900.00, secured debts of less than $1,010,650.00 and an ability to set out a budget where he or she can realistically afford a monthly payment plan to a trustee.

    Chapter 11. Generally utilized for corporate reorganization or for individual reorganizations where the debtor is over the chapter 13 debt limits.

    Chapter 12. Family farmer reorganization.

    Why would a debtor choose to file chapter 13 over chapter 7?
    The debtor owns nonexempt property that would be liquidated in chapter 7.
    The debtor is behind on car or house payments and needs to cure arrears over time.
    Under certain circumstances a debtor may be able to modify a secured debt such as a vehicle or mobile home.
    The debtor is not eligible to file a chapter 7 or to obtain a chapter 7 discharge. The debtor owes debts that can be discharged in chapter 13 but not chapter 7. The debtor seeks to protect a co-debtor from legal action.
    The debtor may have the need for bankruptcy relief for future bills and wants to hold open the possibility for conversion or refiling [e.g. anticipated medical bills].

How much is the debtor required to repay general, unsecured
creditors in chapter 13?

It depends on the debtor's disposible income and how much the creditor would have received had the case been filed under chapter 7. It could range between 0%-106% based on the on those factors.

Is the debtor required to undergo a credit counseling program before a case is filed?
Debtors are normally required to undergo a credit briefing prior to filing for bankruptcy. This briefing generally takes no more than 90 minutes and can be conducted via the internet Additionally, all debtors must undergo a debtor education program prior to the entry of the debtor’s discharge.

Does the debtor have to appear in court after filing for bankruptcy?
All debtors are generally required to appear at a meeting of creditors (also known as a 341 meeting) 20-40 days after their petition is filed. At the meeting a court appointed trustee will question the debtor in order to determine if the debtor was truthful on his petition and schedules. In chapter 7 cases the trustee will also be attempting to determine if liquidation of the debtor’s assets is appropriate, among other things. In chapter 13 cases the trustee is often concerned with whether the debtor’s plan of reorganization complies with the applicable provisions of the bankruptcy code. There are situations where it is necessary to appear before a bankruptcy judge.

What if I previously filed for bankruptcy?
If the prior case was filed more than 8 years ago then it is not likely to have an impact on any new case. If the prior case was filed less than 8 years ago then there may be relevance in terms of the availability of a discharge or a stay against creditor action.

Are spouses required to file for bankruptcy together?
No. Married persons are permitted to file jointly or individually.

What effect does bankruptcy have on a co-debtor?
A non-filing co-debtor remains liable to pay the debt. However, by filing a chapter 13 case a debtor can protect a non-filing co-debtor from legal action if the debt is a consumer debt.

What are examples of debts that cannot be discharged in chapter 13 bankruptcy?
Domestic support obligations.
Certain taxes.
Student loans unless repayment is found by the bankruptcy court to constitute an undue hardship on the debtor.
Criminal fines and restitution.
Debts arising from driving under the influence.
Debts found to have been incurred through fraud or defalcation of fiduciary duty. Restitution or damages awarded in a civil action as a result or a willful or malicious injury by the debtor that caused personal injury to an individual or the death of an individual.
Debts where the creditor was not scheduled, listed or notified with regards to the chapter 13 case.

What are some examples of debts that cannot be discharged in a chapter 7 bankruptcy?
Domestic support obligations.
Certain taxes and debts incurred to pay non-dischargeable taxes.
Student loans unless repayment is found by the bankruptcy court to constitute an undue hardship on the debtor.
Criminal fines and restitution.
Debts arising from driving under the influence.
Obligations incurred as part of a divorce or separation.
Debts found to have been incurred through fraud, defalcation of fiduciary duty and willful and malicious injury.
Certain homeowner association dues.
Debts associated with violations of security laws.

Why might a chapter 7 bankruptcy discharge be denied?
The debtor falsified his or her schedules or otherwise committed perjury in connection with the bankruptcy case.
A debtor whose debts are primarily consumer in nature and whose family income exceeds the median is required to complete a “means test” form. If, under standards contained in the bankruptcy code, the debtor is found to have a certain amount left over that could be paid to unsecured creditors, the bankruptcy court may decide that a discharge is not appropriate unless there are extenuating circumstances.
The debtor transferred away assets in the one year prior to filing with the intention of hindering delaying or defrauding a creditor.
The debtor has failed to provide a satisfactory explanation for a loss of assets or otherwise failed to cooperate with the bankruptcy trustee.

Will I have to pay income taxes on the cancelled debt?

What options exist with regards to secured property in a chapter 7 case?
Reaffirm the obligation with the secured creditor [both the debtor and creditor must agree to the reaffirmation].
Surrender the collateral.
Retain and keep current with creditor [a secured creditor with personal property for collateral may still be permitted to repossess the property should the debtor not reaffirm].
Redeem the property by paying the creditor the value of the collateral [only available with tangible personal property used for personal, family or household use].

What liens can be avoided in bankruptcy?
Certain judgment liens [except arising from domestic support obligations]. Nonpossessory, nonpurchase money security interest in certain household goods that the debtor has exempted. Wholly unsecured mortgages can be avoided in chapter 13.

Can a federal tax lien be avoided in chapter 7?

An incorporated business is ceasing operations. Should it be bankrupted?
A corporation filing bankruptcy is entitled to retain no property and receives no discharge of debts. There is no requirement that an insolvent corporation file for bankruptcy and for that reason state law dissolutions or simply walking away are common.

Good reasons to file a corporation into chapter 7 might include:

To stop a creditor from executing on valuable assets that could otherwise be utilized to pay favored creditors (e.g. trust fund taxes, wage claims or personally guaranteed debt).
To recover preference payments that could be used to pay favored creditors.
To help insulate the principals from allegations that the liquidation of the entity was handled improperly.
The principals would rather turn over liquidation of the entity to a trustee rather than handle it themselves.

Good reasons to avoid a corporate chapter 7 might include:

The assets of the corporation are very nominal.
The time and expense of bankruptcy.
The unwanted exposure and scrutiny of prior transactions.

How can a credit report be obtained? allows individuals to obtain one free credit report every year from Experian, Transunion and Equifax.

What are some alternatives to bankruptcy?

Doing nothing. This may be an appropriate strategy where the debts are small and / or where the debtor is elderly, judgment proof and likely to remain so.

Negotiating. Creditors are sometimes willing to settle on delinquent debt for a percentage of the balance owed. The creditor typically requires that the settlement be paid in a lump sum. There may be tax consequences as the forgiven debt is treated as income unless the taxpayer is insolvent. There are companies in the business of “debt adjusting” that will represent you in such negotiations with creditors. These companies are always overpriced, often ineffective and on occasion, unscrupulous. Credit counseling.

Credit counselors are funded by creditors and will often set up a debt management plan to pay back unsecured consumer debts. Often times a credit counselor is able to negotiate reduced interest rates and late fees.

Offer in compromise. For individuals who have primarily tax debts, offer in compromise with the federal or state taxing authorities is a very legitimate alternative.

Foreclosure assistance services. There is nothing positive to say about companies that prey upon homeowners whose homes are in foreclosure.

Will a debtor’s family, friends or employer find out about the bankruptcy filing?
Although the bankruptcy case file is a public record that is accessible from the internet, usually only creditors will learn of the filing. Current employers and governmental agencies cannot legally discriminate against a debtor because of a bankruptcy filing. Employers may be notified if the debtor’s chapter 13 payments are made by payroll deduction.

How should a debtor prepare for bankruptcy?
Hire an attorney.
Withdraw funds from a bank or credit union to whom the debtor owes money. Stop incurring additional debt.
Continue to pay on certain debts that will survive the bankruptcy.
Stop paying debts that will be discharged in bankruptcy.
Stop repaying debts to family members and/or friends.
Retain all pay stubs received over the past six months from all employers, credit statements and demand letters.
Prepare all tax returns that are not filed.

Is a debtor required to list all creditors and assets on the bankruptcy schedules?

Is the debtor permitted to voluntarily pay debts owed to friends or family members after a chapter 7 is filed?

How long does the process take?
A chapter 7 no-asset case where no adversary proceedings are filed generally takes about 100 days.
A chapter 13 case normally takes 3-5 years.


State Statue

Real or personal property, including a mobile or modular home: unlimited value for up to ½ acre in a municipality or 160 acres elsewhere. This exemption can be claimed by the spouse and children of a deceased owner.

Debtor may file a homestead declaration.

Constitution 10-4





Death benefits: all benefits payable to a specific beneficiary and not to the deceased’s estate.

Annuity proceeds, except for lottery winnings: all.

Life insurance cash surrender value: all.

Illness and disability benefits: all.

Fraternal benefit society payments: all.







Miscellaneous Child support and alimony: all necessary for support.

Damages for injuries to employees in hazardous occupations: all.




Federal pension exemptions

State officer and state employee pensions: all.

County officers and county employee pensions: all.

Firefighter pensions: all.

Police officer pensions: all.

IRAs, Roth IRAs, and ERISA-qualified benefits: all.

Teacher pensions: all.







Personal Property

Deposits into prepaid trust for college education: all.

Deposits into prepaid medical savings account: all.

Deposits prepaid into hurricane savings account: all.

Federal income tax refund/credit: all.

Health aids: all.

Motor vehicle: up to $1,000.

Deposits for funeral contract (pre-need): all.








Public Benefits

Public assistance: all.

Social Security benefits: all.

Unemployment compensation benefits: all.

Veterans’ benefits: all.

Workers’ compensation: all.

Crime victims’ compensation: all if the debt is not for treatment of injuries received during the crime.




443.051(2), (3)





Tools of Your Trade

No exemptions.



Wages for head of family, paid or unpaid: 100% of all wages up to $500 per week; wages deposited into bank account: up to $500 per week for up to 6 months after deposited.

Federal government employee pension received 3 months prior to any execution or collection of the funds: all.




Personal Property: up to $4,000 for single person, up to $8,000 for married couple.

Constitution 10-4


Recent purchases. Personal property purchased in the 90 days prior to filing may not necessarily be exempted. Other exemptions. The above list is not comprehensive. There are a number of other very significant exemptions available under federal and state law.

How is a debtor able to retain non-exempt assets?

File chapter 13.
Compensate the bankruptcy estate in lieu of liquidation.

Should a debtor sell or cashout nonexempt assets and purchase exempt assets prior to a bankruptcy?

This is a form of exemption planning. Exemption planning is not prohibited per se but problems can arise.

Should a debtor seek to protect nonexempt property by transferring it to friends or relations prior to the bankruptcy?


**If a debtor has lived in Florida for less than 2 years then he/she may not be eligible to claim the Florida exemptions and may be required to claim the federal bankruptcy exemptions or the exemptions of some other state.**

Creditor Frequently Asked Questions

What is an automatic stay?

When a bankruptcy case is filed, a stay is automatically entered that prevents many types of collection activities against a debtor or a debtor’s property. Common examples of actions that creditors are often not allowed to take include:

Commencing or continuing a lawsuit.
Repossessing or foreclosing on a debtor’s property.
Contacting the debtor by mail or telephone.

What is the effect of an estranged spouse or ex-spouse filing a bankruptcy case?

Alimony and child support obligations are generally not discharged in bankruptcy unless determined to be a disguised attempt to divide property. Such claims are likely entitled to priority status among creditors if there is a distribution in the case.

If the debtor has filed a chapter 13 bankruptcy, the child support creditor is likely prevented from pursuing the pre-bankruptcy child support outside the context of the bankruptcy case.

If the debtor has filed chapter 7 bankruptcy, the creditor owed child support may have to limit his or her attempts to collect to property that is not property of the bankruptcy estate.

Equitable distribution claims cannot be discharged in chapter 7 cases but can be in chapter 13 cases.

Is a creditor not listed on the debtor’s bankruptcy petition still bound by the automatic stay or discharge order?
Generally speaking, even informal notice will require a creditor to act in accordance with the bankruptcy code. If the case is a no-asset case, a discharge order will likely bind an unscheduled creditor unless there is some other basis for objecting to the dischargeability of the debt.

How long until a creditor’s claim is paid?
It depends on the case. It could take years.

How much will be paid on a creditor’s claim?
It depends on the case. It could be zero, paid in full or somewhere in between.

What actions can a creditor take if the debtor’s case has been dismissed?
A creditor can proceed with all available remedies against the debtor and/or his assets. Dismissal should not be confused with discharge. If the debtor is granted a discharge, most creditors are enjoined from seeking to collect on debts.

What are common reasons for which a creditor might contest a debtor’s chapter 7 discharge?
The debtor’s bankruptcy filing is abusive pursuant to 11 USC 707.
The debtor has falsified his schedules or otherwise perjured himself in connection with the bankruptcy case.
The debtor transferred away assets with the intent to delay or hinder a creditor or bankruptcy trustee.
The debtor has failed to provide a satisfactory explanation for loss of assets.

How could a creditor contest the discharge of a particular debt in chapter 7?
Common reasons would include that the debt was incurred through fraud, willful and malicious injury or defalcation of fiduciary duty. The complaint objecting to dischargeability must be filed within 60 days of the date originally set for the 341 hearing.

How could a creditor contest the discharge of a particular debt in chapter 13?Common reasons would include that the debt was incurred through fraud, a willful or malicious injury by the debtor that caused personal injury to an individual or the death of an individual or defalcation of fiduciary duty. The complaint objecting to dischargeability must be filed within 60 days of the date originally set for the 341 hearing.

If a creditor has obtained a judgment against the debtor prior to his filing, does that mean the judgment will survive the bankruptcy?
A judgment may be discharged in bankruptcy if no timely objection is filed. If the judgment creditor holds lien rights against the debtor’s assets then those lien rights may survive the bankruptcy discharge if not avoided.

May a creditor pursue its claim against the non-filing co-debtor?
If the case is a chapter 7 then the co-debtor may be pursued.If the case is a chapter 13, a co-debtor who owes consumer debt may not be pursued without obtaining relief from the bankruptcy court.

Can an entity be forced into a bankruptcy case if a creditor is owed money by an entity and believes the entity to be disposing of assets improperly?
Under certain limited circumstances, an involuntary bankruptcy case can be filed.

What should I do if my questions are not answered here?
Call my office and ask to speak to me personally about your specific financial situation.


Chapter 11 Frequently Asked Questions


What is chapter 11?
A bankruptcy usually involving an incorporated or registered business that is either seeking to reorganize or effectuate an orderly liquidation.

What is a debtor in possession?
The official title of the debtor after having filed a chapter 11 proceeding. The debtor in possession enjoys important powers and protections but is also burdened by significant duties and benefits.

What are common reasons that an entity would file a chapter 11?
Excessive debt.
Liquidity problems.
Need to reject unprofitable leases or contracts.

What is the effect of chapter 11 on the owners of the entity?
When a chapter 11 is filed, the entity and/or its assets are in play. It is possible that the interest of the pre-bankruptcy owners will be extinguished in chapter 11.

Does chapter 11 provide protections to third parties such as corporate insiders?

What are alternatives to chapter 11?

Out of court workout. Possible benefits of a workout include the time, expense and scrutiny of chapter 11. Possible downsides include hold out creditors, lack of court protection and the debtor’s inability to extract sufficiently favorable concessions from creditors.

Chapter 7 bankruptcy. The debtor’s assets are turned over to a trustee for liquidation and distribution.

Receivership. A receiver is appointed pursuant to state or federal law.

Dissolution. A corporation may dissolve itself, liquidate its assets and distribute funds to its creditors.

Assignment for the benefit of creditors. A debtor can assign its assets to a trustee who marshals and distributes assets in a priority scheme.

What are considerations to take into account when evaluating whether or not to file chapter 11?

Does the debtor have an exit strategy? Common examples would be confirming a plan or reorganization, liquidating or arranging an asset sale. Reorganization plans may entail deleveraging the business or shedding unprofitable ventures or units.

Can the debtor afford chapter 11. Professional fees and court fees can be quite significant.

Can the debtor survive a chapter 11? Businesses in financial difficulty commonly hemorrhage employees, customers and vendors. Being a chapter 11 debtor may also prove a distraction for management.

Does that the debtor have sufficient capital or access to capital? The most common methods for chapter 11 debtors to obtain operating capital are through its operations, asset sales, DIP financing or use of its cash collateral.

Is it advisable to subject to the debtor to scrutiny and/or court oversight? A chapter 11 proceeding is a public matter and certain transactions or dealings [e.g. preferential payments or fraudulent conveyances] may be exposed with unpleasant consequences for insiders, officers or directors. After chapter 11 is filed, executive compensation is subject to approval from the bankruptcy court.

Would it be easier to shut down the entity and create a new entity conducting the same business? This is often the case with personal service businesses or businesses with low capitalization requirements.

How long does a chapter 11 take?
It can range from a few months to several years depending on the case.

What is a chapter 11 plan of reorganization?
The plan of reorganization sets forth how the debtor will emerge from bankruptcy. Included in the many items found in a chapter 11 plan will be identification of the proposed ownership structure and the creditor repayment scheme.

How is a chapter 11 plan confirmed by the court?
Creditors vote on whether to approve a plan that is commonly (but not always) proposed by the debtor. A plan may be confirmed over the objections of some classes of creditors in certain instances.


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